The owner of a Kentucky lumber company said his bank failed to catch a fraudulent checks scheme that cost the company more than $800,000 over two years.
Bryan K. Jude, owner of Coalfield Lumber Co. in Inez, Kentucky, also said he’s incurred $66,749.49 in incidental losses, in overdraft fees and other bank fees as a result of the scheme, according to a lawsuit he filed in U.S. District Court for the Southern District of West Virginia on Sept. 19.
In the lawsuit, Jude said two former employees, Madelina “Tint” Stacy and Sheri Bragg forged checks for two years between 2016 and 2018, costing his company $821,416.72.
The Bank of Mingo failed to closely examine the checks and catch the scheme, despite the fact that bank employees previously had been unwilling to allow authorized individuals to cash or deposit checks on behalf of Coalfield Lumber, Jude said.
Jude is seeking unspecified damages for fraud and conversion against Stacy, Bragg, and BT Speedway and Tint’s Grill, two businesses Stacy owned.
He also seeks unspecified damages from the bank, for negligence and what he said was the bank’s failure to follow state law requiring the bank to exercise certain care and standards in examining the checks, which should have led to their discovery of the alleged fraud.
September’s lawsuit is the second suit Jude has filed this year in regard to the alleged scheme.
He filed a similar lawsuit in February, but the case was dismissed on Sept. 10, with U.S. District Judge Thomas Johnston finding an issue of whether federal court was the right venue for the lawsuit because of a question of whether Jude was a resident of West Virginia or Kentucky.
In 2017, First Bank of Mingo was ordered to pay $1.4 million to the federal government for violating the U.S. Bank Secrecy Act.
Federal prosecutors had said bank employees turned a blind eye to illegal withdrawals and failed to flag suspicious activity that indicated possible illegal activity.
Arthur White Jr., of Lenore, a longtime customer of the bank, admitted to making $1.36 million in withdrawals from the bank between 2006 and 2008 as part of a multimillion-dollar scheme against West Virginia’s leading workers’ compensation provider at the time, according to a previous Gazette-Mail report.
White pleaded guilty in March 2013 to tax evasion and structuring in federal court in Charleston, and Senior Status District Judge John Copenhaver Jr. sentenced him to 30 months in prison.
In the lawsuit filed last month, Jude said Stacy and Bragg would fraudulently sign checks from Coalfield Lumber to people whose names they made up as well as legitimate people whose names they used to forge the checks.
The women would then sign over the checks to themselves or to one of Stacy’s businesses, according to the lawsuit.
At the time of the alleged scheme, Stacy had worked as a clerk for the lumber company for about 10 years, and Bragg had worked as receptionist for about four years.
Jude said Bragg admitted to taking part in the scheme via text on Oct. 25, 2018, saying she was sorry and would pay him back.
“Bryan please let me pay u back I know this is wrong and what I did is wrong [sic],” Bragg texted, according to the lawsuit.
Jude is represented by Mary Pat Statler and Holly Wilson with Bailey Glasser, LLP in Charleston.